Legislature(1999 - 2000)
01/24/1999 09:00 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
GENERAL SUBJECT(S):
Overview: Division of Legislative Audit
Pat Davidson, Legislative Auditor
The following overview was taken in log note format. Tapes and
handouts will be on file with the Senate Finance Committee through the
21st Legislative Session, contact 465-4935. After the 21st
Legislative session they will be available through the Legislative
Library at 465-3808.
Time Meeting Convened: 9:00 AM
Tape(s): SFC-00 # 9 Side A
PRESENT:
NOT PRESENT:
Senator Parnell
Senator P. Kelly
Senator Torgerson
Senator Green
Senator Leman
Senator Phillips
Senator Wilken
Senator Donley
Senator Adams
ALSO PRESENT:
PAT DAVIDSON, DIRECTOR, DIVISION OF LEGISLATIVE AUDIT
JIM KELLY, DIVISION OF LEGISLATIVE AUDIT
LOG
SPEAKER
DISCUSSION
0
CO-CHAIR PARNELL
Introduction
8
PAT DAVIDSON,
DIRECTOR, DIVISION
OF LEGISLATIVE
AUDIT
Handout: Senate Finance Committee
Overviews, January 24,2000
This is brief synopsis of most of the
audits we've completed this past year. I'll
hit the highlights of these audits as they
relate to the topics of financial
compliance, performance measures and
operational efficiencies and effectiveness.
Page 2: Department of Administration, State
Of Alaska, Statewide Single Audit for FY98
This is a review of the state's financial
statements. This report contains 37
recommendations, of which 12 were carried
over from the prior year.
A major concern involves an overexpenditure
of almost $1 million by the Department of
Transportation and Public Utilities from
their maintenance and operations
appropriation. Rather than reduce actual
spending, the department chose not to pay
its State Equipment Fleet bills. This is a
serious problem.
46
CO-CHAIR PARNELL
Did the Department of Transportation and
Public Utilities submit a written
explanation as part of the audit?
50
MS. DAVIDSON
Yes.
Page 20: Department of Corrections,
Internal Controls over the Offender
Financial Accounting (HOFA) System
A prior 1996 audit made recommendations for
improving the internal controls over the
HOFA system. Since that time there has been
an individual convicted of embezzlement of
HOFA funds. This audit was requested to
again review internal controls.
We found the internal control system
remains weak and we made eight
recommendations.
The department has responded in a positive
and proactive manner. The recommendations
are being implemented.
73
As the legislature discusses missions and
measures for agencies, the following report
highlights some issues that might become
common as agencies develop outcome
measures.
Page 12: Department of Health and Social
Services, Division of Alcoholism and Drug
Abuse
The purpose of this audit was to review
several aspects of the state's substance
abuse and treatment programs. At the time
of our review, outcome measures had been
identified but complete information on
program results based on these outcome
measures was not yet available.
From what was available, we found that the
Agency was not monitoring the information
provided nor was the Agency doing follow-
up.
Some examples of the breakdown in the
process to collect consistent information
from the primary service providers were (1)
minimum outcomes established in the request
for proposal; (2) either did not completely
address or provide alternative measures in
the providers' response.
When the providers did provide outcome
measures, the information was typically
incomplete or addressed different measures.
We believe that as the state progresses in
incorporating missions and measures into
the budgetary process, the agencies must
also incorporate these into their grant
process.
99
Page 11:Department of Health and Social
Services, Division Of Family And Youth
Services Follow-Up
Over the last few years we have done
several audits on this division focusing on
child protection issues. These reviews have
taken both a macro view of analyzing agency
operations and resource utilization, and a
micro view looking at individual cases.
Recommendations were made to address
problems of social worker training, the
development and implementation of work
measurement tools, a clear and consistent
policy of ranking investigative efforts for
reports of harm, utilization of personal
services funding and improvements and
enhancements needed to the management
information system.
We are working on another follow-up audit
and expect this will provide an update to
issues raised in previous audits.
122
Page 17: Department of Fish and Game, Use
Of Sport Fish Revenues
Overall we found development projects that
were funded by sport fish revenues did
provide at least some, if not extensive
benefit to the recreational angler.
However, because measurements for sport and
commercial fishing differ, it is impossible
to determine the extent of benefit received
by each competing industry.
We recommended the department develop a
benefit measurement approach with greater
commonality in order to better identify and
segregate which user groups are benefiting
from a given project, and in the case of
sport fishers, the source of the revenues
being used to fund the projects.
148
The remaining audits relate to operational
efficiencies and effectiveness.
Page 16: Department of Natural Resources,
Matanuska Maid Dairy
The report found that state ownership could
no longer be justified for the purposes of
(1) its current operational and financial
viability; (2) its corporate operating
practices; (3) its future role as state-
owned asset; and, (4) its future role in
the development of Alaska agriculture.
The Division of Agriculture disagrees. The
division has no plans to sell although
various parties have approached division
with an interest to buy. The division
strongly discourages those inquiring by
stating that any sale of Mat Maid will be
conditioned upon the purchaser's commitment
to continue the facility's operation and
purchase all available Alaskan milk.
169
Page 24: Department of Transportation and
Public Utilities, Art In Public Places
This report finds that the program is not
working, as most people believe, primarily
due to operational inefficiencies,
miscommunication between agencies, and a
morass of often-conflicting legal opinions
generated over the years.
178
Page 5: Department of Administration,
Division of Longevity Programs, Alaska
Pioneers' Homes
This report found that staffing levels in
the homes are adequate, staff turnover is
below the national average and resident
turnover is low.
One of the more critical recommendations
addressed concerns regarding the
backgrounds, particularly felony
convictions, of certain employees working
at the homes.
The report also recommends contracting out
the pharmacy.
189
The Division of Legislative Audit also
wrote two audits addressing the former
Department of Community and Regional
Affairs.
Page 21: Department of Community and
Regional Affairs, For the Fiscal Year Ended
June 30, 1998
And
Page 22: Department of Community and
Regional Affairs, Pedro Bay Electrification
Project
Both of these audits focus recommendations
to the Division of Energy, which is now
part of the Department of Community and
Economic Development.
The report identified weaknesses in the
construction management areas as they
manifested in individual projects,
including the Pedro Bay Electrification
Project.
The problems included (1) the project
selection process was not adequately
documented, (2) failure to ensure proper
right-of-way easements and delays were
created as a result, (3) an absence of
comprehensive financial records resulting
in a lack of budgetary control.
The Pedro Bay project was intended to
resolve the community's lime-loss problems.
However, the improvements made by this
project have been slight and the community
continues at a 35 percent lime-loss. The
division has hired a contractor to review
and make recommendations regarding
contracting, purchasing and accounting
policies and procedures. They expect the
new policies and procedures to be
implemented by June 2000.
216
Page 25: Department of Transportation and
Public Utilities, Homer Gravel Roads
Project
This report addressed whether the
department reasonably managed these
projects in accordance with statutes,
regulations, contract provisions and
internal policies and procedures. The
report also addressed a complaint made by a
department employee.
We concluded that many of these complaints
had merit. However, just because it was
found that some of the material was out of
specification and the geotextile fabric was
torn, it did not mean that the roads would
prematurely fail. In fact, four years after
completion, the roads are holding up well.
We identified the following weaknesses in
the management of the construction process,
(1) out-of-specification material accepted
by the department; (2) change orders were
frequently issued after completion of the
work; and, (3) some contractors were given
too much control over the projects.
With regard to the Homer Gravel Roads
project in particular, we found the
following. (1) Haul of out-of-specification
material was not effectively halted until
the Federal Highway Administration
threatened funding. (2) The hiring process
used to hire a consultant to review this
project was flawed, making independence
questionable. (3) The Department of Law may
have violated the State Personnel Act by
releasing consultant's report. (4) The
extended administrative leave given to the
employee who filed the complaint was
reasonable under the circumstances.
244
CO-CHAIR PARNELL
Of the issues you raised, which two or
three should the Committee pay most
attention to regarding follow-up?
251
Ms. Davidson
Because this is a finance committee, the
statewide single audit issues should
receive the most attention. Your attention
should improve the agencies efforts in
following the recommendations.
Also, the Committee should watch the
alcohol and drug abuse program because of
the "missions and measures" issue.
Important for department to follow-up with
providers.
268
CO-CHAIR PARNELL
Expect the budget subcommittees will review
past audits for oversight and compliance.
274
SENATOR LEMAN
Are efforts made to hold responsible
parties accountable? Do we fire employees
or seek recovery from contractors?
282
Ms. Davidson
It depends on the circumstance and the
agency's willingness to accept
responsibility. With regard to the Homer
project, if the department finds large
dollar amounts involved with the below-spec
materials, they probably will seek
reimbursement from the contractors.
In situations involving smaller dollar
amounts, the agencies often don't press the
issue.
297
SENATOR LEMAN
Having done similar work to that of the
Homer project, I've learned that some local
pits just cannot produce materials that
meet the specifications, but are still
acceptable. Depending on the details, the
problem may or may not be significant.
I'm concerned with significant allegations
like the Pedro Bay project where deals were
cut and the work simply didn't get done.
I'm concerned that responsibility has not
been taken in a situation like this where
there is mismanagement.
314
MS. DAVIDSON
The problems with the Division of Energy
are significant.
Addressing individual problems is difficult
and it is necessary to implement systematic
change.
319
SENATOR LEMAN
I agree.
321
CO-CHAIR TORGERSON
Page 10: Department of Education, Lower
Yukon School District, Selected Issues
This audit addressed training sessions held
in San Diego, CA. Do you know what a
"Formula 3" reading program covers, who was
invited to the training session, how and if
the Department of Education and Early
Development approved the training and how
much did it cost?
330
MS. DAVIDSON
Formula 3 was a federal grant that the
school district applied for. The grant
proposal identified that the training was
going to be held out of state. The teachers
some administrators in the school district
attended the training.
337
JIM GRIFFIN, AUDIT
MANAGER, DIVISION
OF LEGISLATIVE
AUDIT
[speaking out of microphone range)
338
MS. DAVIDSON
And school board members.
340
CO-CHAIR TORGERSON
Do you remember the cost?
344
MS. DAVIDSON
I'll have to get back to you on the exact
cost.
345
CO-CHAIR TORGERSON
As I understand the situation, the
Administration put together a grant
proposal to take existing teachers, staff
and school board members of the Lower Yukon
School District and train them in San Diego
and the state board of education approved
that grant.
Request more detailed information on the
exact cost.
347
SENATOR ADAMS
Would this be similar to legislators
traveling to San Francisco next weekend for
a meeting with Callan Associates? Is it
also similar to a legislature traveling to
Maui to see how another legislature
operates?
351
MS. DAVIDSON
This training took place in the summer when
many of the teachers were not actually in
Mountain Village and it was determined San
Diego was a location readily available for
much of the staff.
356
SENATOR ADAMS
Was this paid for with federal funding and
did the teachers attend training on their
own time?
358
MS. DAVIDSON
359
MR. GRIFFIN
The school district received a federal
grant to train teachers and implement the
Formula 3 program, which they applied for
directly to the federal government. In
order to provide training to go along with
the program, they got separate grants under
the Migrant Education Program through the
Department of Education and Early
Development that was also federal funds.
Yes, the Department of Education and Early
Development knew about the training because
it was in the grant proposal submitted to
the department.
The funds used were the districts.
375
CO-CHAIR TORGERSON
Disagreed with the comparison to anyone
attending a pre-determined, pre-called
meeting.
Was this meeting only for teachers in the
Lower Yukon School District or was it a
national meeting held for all school
districts and open to anyone to study
Formula 3? Were other districts involved in
going to San Diego?
382
MR. GRIFFIN
No, it was just the school district
personal that attended. The previous year's
training was originally scheduled in
Vancouver British Columbia. However, the
new superintendent cancelled that meeting
and held training in Mountain Village prior
to the beginning of school.
389
CO-CHAIR TORGERSON
That is how I interpreted it rather than
comparing it to a national meeting attended
by those with similar interest in a
subject.
Most of these meetings are held in resort
towns because of expense.
Did I hear you say that a determination was
made that San Diego was a central location
for school district employees?
399
MS. DAVIDSON
Clarify. Many of the teachers were not
living in Mountain Village during the
summer while school was in recess. Several
were in the Lower 48.
403
CO-CHAIR TORGERSON
Is this standard practice for the
Department of Education and Early
Development to review out of state
training?
407
MS. DAVIDSON
409
SENATOR WILKEN
Page 18: Department of Environmental
Conservation, Division of Facility
Construction and Operation Village Safe
Water Program
I've found that there is a lot of money
spent on this program. We cannot tell what
has been done, what work is planned and how
money is to be spent.
This report's recommendation for a
statewide inventory is similar to an
oversight I found last year.
What happens now to push compliance with
the audit's recommendations? Do we do that
or does someone else?
424
CO-CHAIR PARNELL
It starts in this Committee. We address the
matter using two avenues: the capital
budget appropriation and the operating
budget subcommittee.
427
SENATOR WILKEN
So this Committee decides which
recommendations to work on and which not to
work on?
428
CO-CHAIR PARNELL
No, according to the recommendation, the
agency should create a statewide inventory.
Our role is to ensure that happens through
appropriations.
432
SENATOR ADAMS
I Agree. We should have the Department of
Environmental Conservation present us with
a report.
A spicket in the middle of town does not
constitute plumbing for the entire
community.
439
CO-CHAIR PARNELL
Conclusion.
440
Adjourn 9:31 AM
SENATE FINANCE COMMITTEE
LOG NOTES
01/24/00
Page 9
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